Medicaid: States turning down free money, group says

It’s flown under the radar, but perhaps the most dramatic element of Obamacare isn’t changes to Medicare, or the requirement for millions to purchase insurance –- it’s the planned expansion of Medicaid.

That expansion would cover an additional 21.3 million people within the next decade, reducing the number of uninsured nearly by half, according to a new report from the Kaiser Family Foundation , an organization specializing in health care policy.

While that sounds like good news, the sheer size of the expansion has many people worried about cost. Since the Supreme Court ruled that states cannot be forced to participate, eight states have said they won’t expand their current Medicaid programs, and several others say they may follow suit.  But the KFF report says those states may be making life unnecessarily hard for their poorest citizens.

Why? Let’s start with the basics: The cost of Medicaid is currently shared by states and the federal government, with Washington picking up a little more than half the bill. Under Obamacare, the feds would carry a much heavier load: 100% of new costs for the first three years, 95% starting in 2017 and 90% in 2020 and beyond.

The potential impact is huge. Many poor Americans do not now qualify for health insurance. This holds especially true in southern states, which impose strict income limits.  To pick a typical example, in Georgia, a working mother in a family of three is ineligible for Medicaid if she makes more than $9,080 in a year.  Under Obamacare, she could earn up to $26,344 and still be insured through the program.

(Beyond that, if she didn’t have insurance through her job, she would have to purchase her own; to help her afford it she would receive a generous subsidy that would be phased out as her income grew.)

Through a spokesman, Gov. Nathan Deal said Georgia will not participate in the expansion because the state’s analysis projects a withering financial hit. “History shows that advocates of expanded entitlements have long lowballed future costs,” spokesman Brian Robinson said in an e-mail. “Regardless of whether the new costs are $2.5 billion, $4.5 billion or $6.5 billion, the state of Georgia doesn’t have the money to pay for it without a huge tax increase, crowding out all other spending or both.”

But according to the new report from Kaiser, the average cost to a Georgia household would be just $73 a year -– a total of $2.54 billion over the next decade. In addition, Kaiser estimates the state would save $726 million in “uncompensated costs” –- money it now spends to reimburse hospitals who care for uninsured patients for free. The state’s total cost would therefore be $1.81 billion, or $52 per household. For that, an additional 698,000 Georgians would receive insurance.

The report paints a similar picture in other states. In general, states that now have generous programs for the poor –- largely in New England and the Mid-Atlantic states - would actually save money through the expansion. That's because they could eliminate some state-funded safety net programs, since the beneficiaries would be covered under the expanded version of Medicaid.

Alan Weil, executive director of the National Academy for State Health Policy, told reporters Monday he expects the math to eventually sway governors and state legislators, even where Obamacare has been politically toxic.

“The economics of this are very strongly in favor of adopting the expansion,” says Weil. “Early decisions by states (to opt out) could be very different from those that are made a few years out.”

You can see how the changes would affect your state by reading the full report here.